AB InBev to sell stake in Zambia’s National Breweries to Zimbabwe’s Delta Corp

Delta Corporation, Zimbabwe’s largest brewer and a unit of AB InBev said on Thursday that it has reached an agreement to acquire a controlling interest in National Breweries of Zambia.

In a released statement, Delta said that equity is being acquired from Heinrich’s Syndicate, also a subsidiary of AB InBev.

“The equity is being acquired from Heinrich’s Syndicate, a subsidiary of AB InBev. The transaction is subject to various regulatory approvals. The impact of this transaction is currently being determined but is not material for Delta,” said Alex Makamure, Delta’s Company Secretary.

National Breweries of Zambia is the leading sorghum (Opaque) brewer in Zambia whose products are sold under the Chibuku brand.

Delta Beverages also brews the Chibuku brand and has a wealth of experience in that business.

“The Board is optimistic that the company will leverage on its over 60 years’ experience in the sorghum beer sector,” said Delta.

AB InBev announced in May that it was considering selling its 70% majority stake in National Breweries of Zambia. National Breweries is a subsidiary of Zambian Breweries, the country’s largest brewer, which is listed on the Lusaka Securities Exchange. The firm said it was exiting the production of sorghum-based ‘Chibuku’ beer and Chibuku Shake Shake due to unfair competition from other producers in the country and also because AB InBev wants to concentrate on clear beer production.

National Breweries also bottles Coca-Cola products but will have to relinquish its stake in that business to Coca-Cola or one of its bottling partners by next year following the decision of Coca-Cola to acquire its bottling operations from AB InBev.

Confirming the development in May, Zambian Breweries Plc Country Director, Annabelle Degroot said, the company is expected to sell National Breweries, which produces Chibuku, Chibuku Shake Shake and Heinrich`s Syndicate Limited, which produces Super Maheu and non-alcoholic flavoured maize drinks.

“The majority shareholder wants to concentrate on clear beer because that is where its capability and strength are and, as a result, we are selling other businesses. We have also agreed to separate from Coca-Cola, so from next year we will not be selling Coca-Cola products anymore and that was the Coca-Cola group’s decision,” she said.

She added that Zambian Breweries Plc will ensure that the businesses are sold to companies that will operate them effectively and profitably.

“We have agreed to sell our 70 percent shares in National Breweries, which is a listed company. That was a huge decision for us because National Breweries has been with us for as long as we can remember and it is an important brand for Zambia that we have exported to many markets,” she said.

She also explained that the informal opaque beer production has adversely affected the Chibuku Shake Shake resulting in the decision to sell it off.

“We pay tax, packaging is expensive yet some businesses are evading tax and they do not package the opaque beer so we cannot compete in that market anymore,” she said.

The expansion of Delta Beverages of Zimbabwe into neigbouring Zambia will help it shore-up its weak economic growth, a cash crunch in its home market and an eventual loss of a third of its revenue and operating income when Coca-Cola or one of its bottling partners acquires its Coca-Cola franchise.

The brewer was rattled in October 2016 when The Coca-Cola Company (TCCC) announced its intention to terminate its bottler agreement following the completion of the merger between AB InBev and SABMiller. SABMiller was Delta’s largest shareholder before the merger with about 40% in the company. In addition, Delta holds a 49% stake in Schweppes Zimbabwe. Together they produce and sell Coca-Cola soft drinks under the bottler deal.

With the merger between AB InBev and SABMiller now complete, the Belgian brewer is now Delta’s major shareholder with 38.2% stake.

Delta reported revenue of US$483m for the full-year ended 31 March 2017, down 10.26% from the previous year. Sales of Lager declined 8%, while sparkling beverages and sorghum-based Chibuku fell 15% and 6% respectively.

Lager contributed 38% of Delta’s Group sales in 2017, while Sparkling beverages and Sorghum-based Chibuku beer both brought in 29.47% and 32% of sales respectively. Operating Income in the period for Lager declined 11% from the previous year, while sparkling and Sorghum-based Chibuku fell 37% and 11% respectively.

Coca-Cola said earlier in October that it was working with AB InBev towards finalizing the terms and conditions of the agreement for Coke to acquire AB InBev’s remaining interest in Coca-Cola franchises in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras.

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